First time doing our taxes - How enter Mutual Fund Distros?

[Amethyst]

Now that we no longer have rental property, have sold no real estate, and live in a no-state-income-tax state, I decided to try doing our 2020 taxes (previously we've always used a CPA). I purchased H&R Block Deluxe.

The questions are self-evident, except for one thing: They ask for mutual funds capital gains distributions, but do not distinguish between long-term and short-term gains. My understanding is that short-term gains are taxed as regular income, while long-term gains are taxed 20% (we are in the 24% marginal bracket).

I searched the HRB web site, and only found info on gains related to sales of mutual funds. Next I tried chatting with an HRB agent but all she did was direct me to "search" for this and that, which I'd already done.

I must be missing something. How do others handle this?

 

[cathy63]

You will get a 1099-DIV next quarter that will have the short term gains in box 1a, as ordinary dividends; and long term gains in box 2a.

I don't use H&R Block software, but I would definitely expect that it knows how to handle this. Maybe search for 1099-DIV in the help files?

Here are the IRS instructions for issuers of 1099-DIVs. This will tell you what's in each box: https://www.irs.gov/pub/irs-pdf/i1099div.pdf

 

[CardsFan]

I use TurboTax and import the data directly from my brokerage.

I would assume H&R Block has the same functionality?

Of, course, this only works in February when all the forms are final.

 

[Amethyst]

Yes, I know the 1099-DIV will have the info. The question is how to enter it.

I'm actually doing a dry run right now, with manual entries, to see if we need to send the IRS money before the end of the year. We have less dividends this year, but more cap gains distro's.

The software literally does not ask for anything except "capital gains." The only time it asks for long or short-term gains is if you sell a security.

It's odd, because the software does break out dividends vs. Qualified dividends.

You will get a 1099-DIV next quarter that will have the short term gains in box 1a, as ordinary dividends; and long term gains in box 2a.

I don't use H&R Block software, but I would definitely expect that it knows how to handle this. Maybe search for 1099-DIV in the help files?

Here are the IRS instructions for issuers of 1099-DIVs. This will tell you what's in each box: https://www.irs.gov/pub/irs-pdf/i1099div.pdf

 

[Amethyst]

Exactly. I am doing a dry run to see if we owe extra this year. Want to avoid penalties.

I use TurboTax and import the data directly from my brokerage.

I would assume H&R Block has the same functionality?

Of, course, this only works in February when all the forms are final.

 

[pb4uski]

I don't use Block but presume it is similar to TT. You'll create a 1099-DIV form for that brokerage account that looks just like the 1099-DIV that you received from the brokerage... then input the numbers into the form of TT just like they are on the paper 1099-DIV. I use the Forms mode in TT and not the Interview mode.

That is actually how I used to do it... now I just import the data from the brokerage and check that the amounts were imported correctly... they always have been so far.

ST capital gains are combined with dividends on box 1a the 1099-DIV since they are both ordinary income.

Why aren't short-term capital gains listed separately on my form 1099-DIV?

The IRS requires that short-term capital gains paid by mutual funds be treated as ordinary dividend income on Form 1099-DIV

 

[cathy63]

Yes, I know the 1099-DIV will have the info. The question is how to enter it.

I'm actually doing a dry run right now, with manual entries, to see if we need to send the IRS money before the end of the year. We have less dividends this year, but more cap gains distro's.

The software literally does not ask for anything except "capital gains." The only time it asks for long or short-term gains is if you sell a security.

It's odd, because the software does break out dividends vs. Qualified dividends.

The software is mirroring the categories that will be on the 1099-DIV. There is no category for STCGs on a 1099-DIV, so the software won't ask you for it. Enter the numbers this way:

capital gains: long term cap gains distribution
dividends: short term cap gains distribution + all dividends
qualified dividends: the portion of all dividends that are qualified (This one is hard to tell in advance, but there may be some info on your brokerage statements or on the fund's website that can help you figure it out.)

 

[jazz4cash]

I thought it was 1099-B to report sales of stocks and funds

 

[Amethyst]

Got it!

I was actually going to do this (combining STG and dividends) as a workaround, but now I see that's how it's supposed to go.

Thanks, all!

The software is mirroring the categories that will be on the 1099-DIV. There is no category for STCGs on a 1099-DIV, so the software won't ask you for it. Enter the numbers this way:

capital gains: long term cap gains distribution
dividends: short term cap gains distribution + all dividends
qualified dividends: the portion of all dividends that are qualified (This one is hard to tell in advance, but there may be some info on your brokerage statements or on the fund's website that can help you figure it out.)

 

[SecondCor521]

I thought it was 1099-B to report sales of stocks and funds

1099-B is if you sell an asset.

1099-DIV is if you own a mutual fund and they sell an asset inside the mutual fund.

 

[rk911]

Exactly. I am doing a dry run to see if we owe extra this year. Want to avoid penalties.

if you use TT you can manually enter the 1099-DIV data. TT will walk you thru it box-by-box. just use TT's "interview mode". i do it this way every year.

 

[audreyh1]

Now that we no longer have rental property, have sold no real estate, and live in a no-state-income-tax state, I decided to try doing our 2020 taxes (previously we've always used a CPA). I purchased H&R Block Deluxe.

The questions are self-evident, except for one thing: They ask for mutual funds capital gains distributions, but do not distinguish between long-term and short-term gains. My understanding is that short-term gains are taxed as regular income, while long-term gains are taxed 20% (we are in the 24% marginal bracket).

I searched the HRB web site, and only found info on gains related to sales of mutual funds. Next I tried chatting with an HRB agent but all she did was direct me to "search" for this and that, which I'd already done.

I must be missing something. How do others handle this?

They are entered on Schedule D. Line 13.

https://www.irs.gov/pub/irs-pdf/i1040sd.pdf

Search on distributions in that document.

Yes, short-term cap gains distributions are lumped in with ordinary divs, unfortunately. Which means you can’t use a short-term capital loss to offset them.

Long term capital gains aren’t taxed at the 20% rate until your total income exceeds over $490K. In fact if your joint income is under $100K the long-term cap gain tax rate is 0%!

 

[Amethyst]

As I said previously, I'm not working from 1099's yet. Just from my own tracking, and the year-end-distribution pages we've been sharing. I'll clear all the fields and re-populate with real 1099's when they arrive.

It was rather dispiriting to watch our "refund" evaporate as I re-populated the Dividend fields with Ordinary Div + STG, although that means our CPA last year did a good job estimating what we'd need to withhold in 2020.

It was nice not having to do a State return this year. I hope COVID's heavy blows to the hospitality/tourist industry don't force FL to institute an income tax.

They are entered on Schedule D. Line 13.

https://www.irs.gov/pub/irs-pdf/i1040sd.pdf

Search on distributions in that document.

Yes, short-term cap gains distributions are lumped in with ordinary divs, unfortunately. Which means you can’t use a short-term capital loss to offset them.

Long term capital gains aren’t taxed at the 20% rate until your total income exceeds over $490K. In fact if your joint income is under $100K the long-term cap gain tax rate is 0%!

 

[audreyh1]

As I said previously, I'm not working from 1099's yet. Just from my own tracking, and the year-end-distribution pages we've been sharing. I'll clear all the fields and re-populate with real 1099's when they arrive.

It was rather dispiriting to watch our "refund" evaporate as I re-populated the Dividend fields with Ordinary Div + STG, although that means our CPA last year did a good job estimating what we'd need to withhold in 2020.

It was nice not having to do a State return this year. I hope COVID's heavy blows to the hospitality/tourist industry don't force FL to institute an income tax.

It may not be quite so bad. Your qualified dividends, which are taxed at long-term capital gains rates, may lower your taxes. You probably don't know the full amount of qualified dividends yet. Fidelity doesn’t report which dividends are qualified from mutual funds until late Jan. I imagine other brokerages are the same. I end up using prior year percentages of qualified versus ordinary dividends to get an estimate for my Jan 15 estimated taxes. If I assumed that all equity mutual fund dividends were ordinary, I would way overpay my Jan estimated taxes.

 

[Amethyst]

Thanks! Actually Vanguard and T. Rowe Price do give an estimated %age of qualified dividends in their year-end projections. From looking at our 2019 return, the %age (for our funds, anyway) remains pretty close to last year's. We have little with Fidelity.

It may not be quite so bad. Your qualified dividends, which are taxed at long-term capital gains rates, may lower your taxes. You probably don't know the full amount of qualified dividends yet. Fidelity doesn’t report which dividends are qualified from mutual funds until late Jan. I imagine other brokerages are the same. I end up using prior year percentages of qualified versus ordinary dividends to get an estimate for my Jan 15 estimated taxes. If I assumed that all equity mutual fund dividends were ordinary, I would way overpay my Jan estimated taxes.

 

[audreyh1]

Thanks! Actually Vanguard and T. Rowe Price do give an estimated %age of qualified dividends in their year-end projections. From looking at our 2019 return, the %age (for our funds, anyway) remains pretty close to last year's. We have little with Fidelity.

Well that’s handy! I have funds from other fund families too, and none of them give estimated % qualified dividends, so I estimate based on previous year ratios. Which has been close enough for my Jan estimated taxes.

Did using qualified dividends help reduce your taxes owed?

 

[Amethyst]

Nope, because I already had entered QDI (the software asks for it).

Did using qualified dividends help reduce your taxes owed?

 

[audreyh1]

Oh well!

 

[walkinwood]

The software is mirroring the categories that will be on the 1099-DIV. There is no category for STCGs on a 1099-DIV, so the software won't ask you for it. Enter the numbers this way:

capital gains: long term cap gains distribution
dividends: short term cap gains distribution + all dividends
qualified dividends: the portion of all dividends that are qualified (This one is hard to tell in advance, but there may be some info on your brokerage statements or on the fund's website that can help you figure it out.)

My understanding is that:
1099 DIV Box 1a Total ordinary dividends = ST cap gains distributions + dividends distributed + foreign tax paid (box7)



Obviously, the last part only matters if you have funds that invest internationally. You will not know the exact amount in box 7 till you get your 1099 DIV, but a 8-10% of that fund dividend will get you close.